MGT-519
STRATEGIC MARKETING
AAMER SIDDIQI
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LECTURE 16
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STRATEGIC MARKETING
WHAT IS MARKETING
MARKETING: “The social process by which individuals and groups obtain what they need
and want through creating and exchanging products and value with
others” — Philip Kotler
“The processes of planning and executing the conception, pricing,
promotion and distribution of ideas, goods and services to create
exchanges that satisfy individual organizational objectives” — American
Marketing Association
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• Marketing an ongoing process in a “dynamic” environment.
• Market tends to change—what customers want today is not necessarily
what they want tomorrow.
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This process involves both planning and implementing (executing) the
plan.
• To summarise then we can see that a simple definition of marketing would
be: “The right product, in the right place, at the right time, at the right price,” .
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THE 3 LEVELS OF MARKETING
LEVEL 1. Marketing a way of doing business.
Top level of Marketing
In essence it’s the process by which a company decides what it will
sell, to whom, when & how and then does it!
LEVEL 2. Marketing as Strategy.
Segmentation – Targeting – Positioning (STP)
– Segmentation: Deciding which customers to target
– Targeting: Which customers to target
– Positioning: Deciding what messages you want the Target to
associate with the product
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• Branding: central aspect to brand – Name
– Image or perception. Link between attributes customers
associate with a brand and how the brand owner wants the
consumer to perceive the brand
– Effective brand names build a connection between the brand’s
personality and the actual product/service
LEVEL 3. MARKETING MIX – 4 PS.
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PRODUCT
PRICE
PLACE
PROMOTION
• This level spans all aspects of a business and across all customer
contact points
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NEEDS
• Need: a basic requirement that an individual has to satisfy to
continue to exist
Maslow’s Hierarchy of Needs
• 5 level Pyramid
• Higher needs only come into focus when lower needs are met
• Once individual moved to next level, needs in lower level no longer
prioritized.
• If a lower set of needs are deficient; temporarily re-prioritize those
needs but will not permanently regress to the lower level
• Humans have different needs based on demographics
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• Demand is a want for a specific product/service supported by the
ability and willingness to pay for it
• Concept of demand fundamental to marketing
• Customers who want and can pay for the product/service. e.g. many
consumers want a Ferrari car, but few are able and willing to buy
• Marketers spend time trying to predict patterns & level of demand of
products/services and the needs/wants of the consumers
THE EXCHANGE PROCESS
• There must be two parties, each with unsatisfied needs.
• Each must have something to offer. Marketing involves voluntary
“exchange” relationships where both sides must be willing parties
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UTILITY
• Utility : Measure of the relative satisfaction/desirability of
consumption of various goods and services. Utility is a concept
within economics that is related to marketing.
1. Form utility: Usefulness of a product due to its form (raw materials to
finished products). Product planning and development activities create
form utility.
2. Time utility: Product availability when consumers want to purchase
it. Storage of product after production
3. Place utility: Flow of goods from the place of abundant to the place
creates place utility.
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COMPETITIVE ADVANTAGE
• Competitive advantage grows out of value a firm is able to create for its
buyers that exceeds the firm's cost of creating it. Value is what buyers are
willing to pay, and superior value stems from offering lower prices than
competitors for equivalent benefits or providing unique benefits that more
than offset a higher price. There are two basic types of competitive
advantage: cost leadership and differentiation - Michael Porter,
Competitive Advantage
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CREATION OF COMPETITIVE ADVANTAGE
Roger’s 5 Adopter characteristics
• Innovator: Purchase the product at the beginning of the lifecycle;
not afraid of trying new products that suit their lifestyle and will also
pay a premium for that benefit
• Early Adopters: Opinion leaders and naturally adopt products after
the innovators; crucial because adoption by them means the product
becomes acceptable, spurring on later purchasers
• Early Majority: Spurred on by the early adopters; wait to see if the
product will be adopted
• Late Majority: Usually purchase the product at the late stages of
majority within the lifecycle
• Laggards: Usually purchase the product near the end of its life;
‘wait and see’ group (wait to see if the product will get cheaper)
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IMPLEMENTATION OF COMPETITIVE ADVANTAGE
• Value chain - a systematic way of examining all the activities a firm
performs and how they interact
• Helps to understand the behaviour of costs and the existing and
potential sources of differentiation
• Value chain framework is beneficial because it
– Emphasizes that competitive advantage can come anywhere the
value chain.
– Important to understand how a firm fits into the overall value
system (suppliers, channels, and buyers)
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IMPLEMENTATION OF COMPETITIVE ADVANTAGE (CONT’D)
• Porter’s 3 choices of strategic position
• Variety-based positioning
– Company produces products using distinctive sets of activities
– Involves choice of product variety rather than customer segment
• Needs-based positioning – STP process.
– Distinct groups of customers with differing needs
– Tailored set of activities can serve those needs best.
– Similar as Porter’s focus strategy
• Access-based positioning –
– Customers with same needs but activities to reach them is different
– Example-website and a shop sell the same items but serve
different customers based on access.
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SUSTAINING COMPETITIVE ADVANTAGE
• Porter’s 3 conditions
• Hierarchy of source (durability and imitability)
– Lower-order advantages may be easily imitated e.g low labour cost
– Higher order advantages difficult to copy e.g proprietary technology,
brand reputation or customer relationships
– Movement of Foreign to low labour cost countries-exploit low wage
economy
• Number of distinct sources
– Harder to imitate than few
• Constant improvement and upgrading
– Creating new advantages as fast as competitors replicate old ones
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SUSTAINING COMPETITIVE ADVANTAGE (CONT’D)
• Core competencies-Collective learning, diverse production skills and
integration of multiple streams of technology
• Integration skills underlie a company's various product lines
• 3 tests to identify core competencies:
(1) provides potential access to wide variety of markets,
(2) makes significant contribution to end user value, and
(3) difficult for competitors to imitate
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CORE COMPETENCIES AND CAPABILITIES
• 4 elements for developing strategy
(1) Portfolio of competencies
• Competencies are the roots of competitive advantage
• Businesses be organized as portfolio of competencies
• Organization of company into autonomous strategic business units can cripple
ability to exploit and develop competencies
(2) Products based on competencies
• Product to be based on core competencies
• Core products being physical embodiment of one or more core competencies
(3) Continuous investment in core competencies or capabilities
• Skills built through process of continuous improvement
• The costs of losing a core competence can be only partly calculated in
advance
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CORE COMPETENCIES AND CAPABILITIES
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(4) Caution: core competencies as core rigidities
Consensus of opinion about the limitations to restricting product development
to areas of core competencies.
– Can transform to core rigidities.
RESOURCE-BASED VIEW OF THE FIRM (RBV)
RBV framework Firms have different collections of physical and intangible assets and
capabilities, called Resources
Resources are more broadly defined to be
– physical (e.g. property rights, capital)
– intangible (e.g. brand names, technological know how)
– organizational (e.g. routines or processes like lean manufacturing)
Companies don’t have the same resources due to different
– set of experience
– assets and skills
– organisational culture
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RESOURCE-BASED VIEW OF THE FIRM-RBV (CONT’D)
• Collins and Montgomery (1995) 5 tests for a valuable resource
1. Inimitability - how hard is it for competitors to copy the resource? A company
can stall imitation if the resource is
(i) physically unique
(ii) a consequence of path dependent development activities
(iii) causally ambiguous (competitors don't know what to imitate)
(iv) a costly asset investment for a limited market-economic deterrence.
2. Durability - how quickly does the resource depreciate?
3. Appropriability - who captures the value that the resource creates: company,
customers, distributors, suppliers, or employees?
4. Substitutability - can a unique resource be trumped by a different resource?
5. Competitive Superiority - is the resource really better relative to competitors?
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HYPER COMPETITION
• Hypercompetition involves the creative destruction of opponent’s
advantage & disruption of the status quo
• A strong emphasis on SWOT analysis
• Evolved Game Theory:Tool for analysing customers’ and
competitors’ responses to a firm’s competitive moves
3 elements for successful strategy in hypercompetitive markets
1. Vision for how to disrupt a market
2. Key capabilities enabling speed and surprise in a wide range of
actions
3. Disruptive tactics illuminated by game theory
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THE MARKETING CONCEPT
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Four eras in the development of business
The Production Era
Minimal dialogue between customers and suppliers
Mass production
Homogenous products
Distribution is the focus of marketing
The Institutional Period and Selling Orientation
Rapid growth
More focus on cost, inventory asset management
Selling focus (company builds it and sales person sells it)
Minimal customer voice
Increasing need for marketing communications
The development of the 4Ps
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THE MARKETING CONCEPT (CONT’D)
3. The Marketing Concept
• Companies should only make what they can market instead of trying
to market what they have made
• Increasing customer focus
4. Relationship Marketing/ Supply Chain Era
• Customers now have a dialogue, not just a voice
• Close, long-term relationships based on mutual trust
• More emphasis on win-win outcomes
5. Value Chain Era
• Start with customer requirement and build infrastructure to deliver
maximum value
• Integration of supply and demand chains
• Proactive, knowledge-based relationships
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WHAT CAN BE MARKETED
• Goods: physical goods that can be seen and touched
– Having form and substance, e.g. book, a pen,
• Services: intangible items provided by other people, e.g
doctor,
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On purchase of a service don’t gain ownership
Goods and services not discrete categories
but a continuum
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THE GOODS AND SERVICES CONTINUUM
• “Goods and services are the outputs offered by businesses to
satisfy the demands of consumer and industrial markets”
• Tangibility: – Goods are tangible products
– Services are intangible
• Perishability:
– Goods have some degree of durability beyond the time of purchase
– Services do not; they perish as they are delivered
• Separability:
– Goods can be stored for later use ,production/consumption are typically
separate
– production and consumption of services are simultaneous
– services and the service provider cannot be separated
• Standardisation:
– Quality of goods can be controlled through standardisation and grading in
the production process.
– The quality of services, is different each time they are delivered
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PRODUCT
• ‘Product’ as a bundle of attributes or characteristics, example
a bread
• Physical attributes provide different benefits to the buyer
• Attributes may fulfill 1 or more needs (physiological, social
etc)
• Product may have to satisfy many needs to be successful
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THE TOTAL PRODUCT OFFERING
• TPO consists of four levels
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The Core
The Basic product
The Augmented product
The Perceived product
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BRANDING
• Branding spans two levels in the total product model.
– Brand Identity &
– Brand Image
• As Brand Identity, it is a part of the basic product, giving it a
name and signalling its level of quality
Brand Image is also an important part of the customer’s
perception of the product
• Fits into the model’s outer ring
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ANSOFF’S MATRIX
• A business’ attempts to grow depend on whether it markets
new or existing products in new or existing markets
• The output from the Ansoff product/market matrix is a series
of suggested growth strategies that set the direction for the
business strategy
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ANSOFF’S MATRIX
• Market penetration seeks to achieve four main objectives:
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Maintain or increase the market share of current products –
Secure dominance of growth markets
Restructure a mature market by driving out competitors
Increase usage by existing customers
• Market development - a growth strategy where the business seeks
to sell its existing products into new markets.
• There are many possible ways of approaching this strategy,
including:
– New geographical markets; for example exporting the product to a new
country
– New product dimensions or packaging: for example
– New distribution channels
– Different pricing policies to attract different customers or create new market
segments
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ANSOFF’S MATRIX (CONT’D)
• Product development - a strategy where a business aims to
introduce new products into existing markets.
• This strategy may require the development of new
competencies and requires business to develop modified
products xisting markets
• Diversification - is the name given to the growth strategy
where a business markets new products in new markets.
• Inherently more risk strategy because the business is moving
into markets in which it has little or no experience. For a
business to adopt a diversification strategy, therefore, it must
have a clear idea about what it expects to gain from the
strategy and an honest assessment of the risks
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THE 5 M’S
• Aligning a firm’s internal sources to those needed by it in
order to successfully implement its strategies for the market/s
it is operating in
1. Men
2. Money
3.Materials
2. Machinery
5. Minutes
• Highlighting shortfalls in existing resources
• Allows management take decisions
• whether the acquisition and
• deployment of the extra required resources is desirable given
the anticipated benefits and returns to the firm.
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SWOT-ANALYSIS
• SWOT analysis provides an overall overview of the
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strengths,
weaknesses,
opportunities and
threats of the firm and its environment
• Strengths are the internal competencies a company needs to
have
• Weaknesses are the competencies that the company does not
have; from the customer’s perspective
• If the customer doesn’t see something as a strength, then no
matter how proud of it the business is it is meaningless in a
SWOT analysis.
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SWOT-ANALYSIS (CONT’D)
• Marketing opportunity is an attractive area for a in which the company would
enjoy a competitive advantage
• Environmental threat is a challenge posed by an unfavourable trend or
development in the environment that would lead, to the erosion of the
company's position
• After performing SWOT analysis, the company uses findings to define the main
issues to be addressed in the strategic marketing plan
• Decisions of these issues lead to setting of
– objectives,
– strategies and
– Tactics
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IMPLEMENTATION, ANALYSIS, CONTROL & EVALUATION
• Marketing control is the process of monitoring the marketing
plan
– as they proceed and
– then taking action to adjust the plans through changes in the
marketing mix where necessary
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Objective states where you want to be
The plan itself sets out the preferred route destination
Control keeps the process on the right route
What alternative routes are available if original becomes
blocked
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IMPLEMENTATION, ANALYSIS, CONTROL & EVALUATION (CONT’D)
• Control involves: – measurement
– evaluation and
– monitoring
• Resources are scarce and costly so it is important to control
marketing plans
• Control involves setting standards.
• In management variance analysis is used to compare actual
progress against the standards
• Where there is a significant variation from the standard it is
reported for further investigation and corrective action
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IMPLEMENTATION, ANALYSIS, CONTROL & EVALUATION (CONT’D)
• This process is no different in marketing than it is in
accounting
• There are many approaches to control
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THANKYOU
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